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How Higher Taxes Saved Me A Boatload Of Money

Updated: 02/17/2020 by Financial Samurai 75 Comments

When the state of California raised the sales tax by another 1% on April 1, 2009 I was pretty pissed.  What kind of government expects their residents to pay a whopping 10% tax on everything they buy?  Pedro doesn’t want to pay $200 in taxes on his $2,000 60-inch LCD TV.  Nancy shouldn’t have to pay $300 more on her $3,000 diamond encrusted bracelet.  And I certainly don’t want to spend $5,200 in taxes on a handsome $52,000 BMW!  That’s just ridiculous!

We the people of California deserve our luxury items just like every other parrot-brained consumer in America.  Who’s to dictate what we can and can’t waste our hard earned money on?  Certainly not some bureaucrat in Sacramento counting all his money under the table, no way!

GOVERNMENT WANTS YOU TO SAVE WHILE THEY SPEND

I was angry about the mismanaged state of our budget and so I went on strike.  I cut down my purchases so drastically that by April, 2010, one year after the sales tax raise, I literally had over $20,000 in extra spending money in the bank.  You see, I figure I spend about $20,000 a year for the past 5 years on stuff.  This stuff includes automobiles, watches, shoes, clothing, musical instruments, computers and so forth.

I could accept paying 8.5%, or $1,700 in taxes on $20,000 a year in stuff.  But, I drew the line at 10% and wasn’t willing to support government waste, greed, and mismanagement by contributing $2,000 a year in sales tax.  I’d rather just laze around and demand government help than contribute to a lost cause so I stopped consuming in California.

The $1,700 in California sales taxes I paid on average for the past 5 years literally declined by 95% last year.  Whenever there is something to buy in California, I think about the 10% sales tax and get sick to my stomach.  I end up putting the item back on the shelf and walk away.

THANK YOU CALIFORNIA

I just want to formally thank California for jacking up taxes so much.  It’s great that whether one is poor or rich, they are still going to have to pay the same 10% sales tax on basic necessities.  So thoughtful of you guys!  Without government mismanagement and corruption, I wouldn’t be $20,000 richer today.  I would have spent merrily all along, not thinking about where the tax revenue is going.

So thanks again guys for helping me save a boatload of money over the past year.  You guys might as well increase the sales tax to 30% for all I care.  You’ll really crush your tax revenue by causing a halt in spending.  Not only that, you’ll just have people move out of California.  Washington, here I come!

2017 Marginal Federal Income Tax Rates

Assuming Trump doesn’t lower them. This existing tier doesn’t reward work ethic. It punishes!

Tax Savings Recommendation

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Start a simple business to pay less taxes and contribute more to pre-tax retirement accounts

Start a simple business to pay less taxes and contribute more to pre-tax retirement accounts. Instead of paying taxes on $100,000 in income, you’re only paying taxes on $12,000 for maybe a $2,000 tax bill, or 2% effective tax rate.

Updated for 2020 and beyond. Income taxes are set to come down under President Trump. As a result, those who contributed to their Roth IRA or Roth 401k and planned on retiring in 2017 – 2021 had wrong tax expectations.

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Filed Under: Big Government, Taxes Tagged With: frustration, irrational, Reality

Author Bio: I started Financial Samurai in 2009 to help people achieve financial freedom sooner. Financial Samurai is now one of the largest independently run personal finance sites with about one million visitors a month.

I spent 13 years working at Goldman Sachs and Credit Suisse. In 1999, I earned my BA from William & Mary and in 2006, I received my MBA from UC Berkeley.

In 2012, I left banking after negotiating a severance package worth over five years of living expenses. Today, I enjoy being a stay-at-home dad to two young children, playing tennis, and writing.

Order a hardcopy of my new WSJ bestselling book, Buy This, Not That: How To Spend Your Way To Wealth And Freedom. Not only will you build more wealth by reading my book, you’ll also make better choices when faced with some of life’s biggest decisions.

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Comments

  1. Liz says

    March 8, 2011 at 7:15 am

    I pay more in bottled water costs than I would in taxes. I have to buy the water, because the pipes in my metro area have only had patchwork since the Great Depression, and the water is periodically polluted with, among other things, lead and raw sewage.

    So for the love of all that is holy, every time I hear so much whining about taxes this and taxes that, I really wish people would remember that taxes also buy us stuff. And if you’re not buying in to the cheaper economies of scale available through things like municipal water, you might be paying even more in other ways. (And before the Randians chime in, no, I do not believe the free market can or will provide a cheaper, more effective solution to a product that is necessary for basic human survival).

    Reply
  2. Josh says

    December 6, 2010 at 12:26 am

    Hey Sam,

    Great point about the demotivating effects of increased taxation. I do think that there will be a significant number of intelligent middle-upper class people that will just decide to ‘coast’ once taxes hit a certain threshold. It’s only logical since more effort will only put more money into the governments hands to waste.

    California has a long way to go to recover from the mess they’ve gotten into and I definitely don’t plan on funding that recovery any more than I have to.

    My best,
    -Josh

    Reply
  3. Barb Friedberg says

    November 30, 2010 at 6:44 am

    Unfortunately, many are not as wise as you are, and will continue to spend and be raped by the taxes. Myself, I left California in the 90’s. The cost of living was too much for the lifestyle my husband and I wanted for ourselves and our family. Subsequently, we have lived very well in various less expensive areas and amassed a substantial retirment fund tin the process.

    Reply
  4. Jan says

    October 21, 2010 at 7:40 am

    My town just raised taxes to 10%. I drive to the next town to buy anything.

    Reply
  5. Brucebucks says

    October 18, 2010 at 8:07 pm

    You’re a stud! $20,000 in a year is awesome! Props to you. I hope to save that this year but the problem is it will go to the government to pay off loans!

    Reply
    • Financial Samurai says

      October 18, 2010 at 10:02 pm

      Ha, not a stud, just a guy who doesn’t agree with forever rising taxes! Went ahead and went on strike.

      Cheers

      Reply
  6. The Financial Blogger says

    October 18, 2010 at 5:40 pm

    No worries with people stop working Sam. I pay 45% on my next dollar and I keep working for more ;-) hahaha!

    I would feel better with a base taxe of 20% and a luxury taxe on goods. At least, I wouldn’t have the feeling that I pay for everybody all the time ;-). More thoughts on taxes on today’s post (great coincidence, isn’t?)

    Reply
    • Financial Samurai says

      October 18, 2010 at 6:19 pm

      You should come to America! We LOVE people like you who LOVE to work more to pay 45% tax to help subsidize the 47% o Americans who don’t pay anything. Great attitude mate!

      Reply
  7. Darwin's Money says

    October 17, 2010 at 12:05 pm

    Wait, I’m confused? Obama keeps telling us that raising taxes is good for us and reminds us about how well the economy did under the Clinton tax rates. Surely, the government can make better use out of our funds than private industry and citizens, no?

    Reply
    • Financial Samurai says

      October 18, 2010 at 1:24 pm

      no.

      Reply
  8. Mike@atfinancialplan.com says

    October 17, 2010 at 6:16 am

    Canada is starting to look good. I think the VAT is 17%, plus the income taxes that are similar to ours. However, that cost includes all the health care. What do you get for 10% in California? Probably not that much service.

    More insidious about CA is the aggressiveness of the state tax authority. I remember reading a story of a resident who bought a very expensive car. Because government knows your income and apparently can tie that purchase to it, they went after her to find out how she could afford such an expensive car. (At is turns out, she got a big lump sum from an insurance payout on her wrecked car – which she turned over as a down payment on the new car). Sick.

    Reply
    • Financial Samurai says

      October 17, 2010 at 6:18 am

      For 10%, we get some damn good sunshine and awesome nature!

      Reply
  9. TripleSigma says

    October 16, 2010 at 7:11 pm

    What about the stealth tax in the debasement of the USD$.

    Nobody complains about the dollar losing value or “real” inflation which is a tax that punishes hard working savers regardless of state…..
    Sadly most people think this is a good thing because it “helps exports” which is a joke.

    Reply
    • Financial Samurai says

      October 16, 2010 at 8:50 pm

      I’m a saver, and I don’t mind the weak dollar. There is no real inflation and rates will stay low for a looong time.

      I am buying real estate now though. No brainer imo with rental yields at 7-8%.

      Reply
  10. Fig says

    October 16, 2010 at 4:42 pm

    I guess my experience makes me think you sound like a whiner. I paid 9.75% where I lived in the states and now I pay 15% in New Zealand.

    I suppose you could always move to a state without sales tax. Try Oregon. It’s all California transplants so you’ll fit right in. ;)

    Reply
    • Financial Samurai says

      October 16, 2010 at 6:02 pm

      Thanks for calling me a whiner. A whiner is someone who doesn’t do anything about their displeasure. I shutdown $20,000 worth of spending in protest of the increased tax.

      Reply
      • Fig says

        October 17, 2010 at 1:51 pm

        Oh, don’t be sensitive. ;P I’m probably more of a whiner than you are over all. I hope your protest makes you happy. :)

        Reply
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